The estimated deficit for the current financial year was slashed by 95 per cent to $1.6 billion - and it may become a surplus by the end of March if the stock market continues to surge.
The main reason why the $36.5 billion estimate made in the Budget last year has been proved wrong is the windfall revenue from stocks the Government bought during its market intervention in August 1988.
Mr Tsang has consistently underestimated government revenue in recent years - except in 1998-99, which saw the abrupt downturn in the economy during the Asian financial turmoil.
In 1997-98, there was an unexpected windfall of $55 billion, the greatest discrepancy in recent years, leading to a surplus of $86.87 billion.
The $34.9 billion reduction in this year's estimated deficit includes $21 billion from unexpected investment returns, $10.7 billion from government underspending and $3.1 billion from land premiums.
'The dramatic improvement in the financial position comes almost single-handedly from an unexpected growth in the earnings on our fiscal reserves invested with the Exchange Fund,' Mr Tsang said.
But he warned that such large returns could not be expected to continue.
